Getting value from your benefits...

Have you ever inherited a project and been asked to deliver of a set of benefits numbers that look like they have been cobbled together as an exercise in spend justification but with no obvious link to the actual dynamics of your business? Or perhaps you have been sold an unfounded vision of net gains in the future if only you would sign up to a commitment of actual cash today and for the next three years? Have you been shown industry benchmarks you can’t relate to, easy assumptions and weak logic that make fragile footings on which to build?

Many small and medium-sized businesses (and some large ones) struggle to define clearly what project and investment benefits they will target and how they will evidence their achievement. After all, simply mobilising the resources and maintaining the focus necessary to define a clear set of requirements, gain internal sponsorship, run a structured selection process, negotiate and then contract with vendors can feel like enough of an ordeal – and you’ve not even started the meat of project delivery. So where do you find the bandwidth and the insights to establish a proper benefits case along the way?

It is precisely the smaller business that needs a laser focus on likely benefits and on post-project value realisation. Big investments are a big deal and the opportunities to make a lasting difference by doing something transformative probably don’t come around that often in the SME world.

Although there is no miracle solution, you owe it to yourselves to try to do certain things well and, as is often the case, a clear and simple approach goes a long way towards achieving the goal of a good case. So, start by answering some basic questions…

What thing or things will change as a result of what you are proposing to do?

In simple terms, you invest either to increase or protect your top line prospects, control costs, use company assets more efficiently or align with market and regulatory expectations thereby avoiding commercial or reputational risk to the business. Your investment will be aimed at changing factors within your operations that you can reasonably expect to influence positively one or more of these strategic objectives. What are the factors that will change and what strategic objectives do the changes promote? If you can’t articulate simple responses and share them in written form, you are on shaky ground to start with.

What needle is going to move as a result of this change?

You are going to have to demonstrably impact performance in some way. This comes down to the tracking of one or more business measures or KPIs. Do you know which ones? Can you explain how they relate to the things you are changing through the investment and the project?

How are you going to measure the baseline situation and the future change?

Having said that we need to pick one or more KPIs, we then have to make sure that there is a common understanding of what each KPI means to the business and how it is calculated at the mathematical formula level. Take the notion of service level in the supply chain domain as an example. Does this mean stock availability at your warehouse or availability at the retailer distribution centre? Are you looking at “on time and in full” in the allotted delivery window, or are you counting permitted re-bookings the following day as a hit? To some extent, it doesn’t matter, as long as you are all clear and using the same standard across the business and when comparing the before and the after situations. And if you are looking to measure something a bit different or new, do you have the data to support this both from a legacy perspective and going forward?

Is there a clearly understood starting point?

This sounds disarmingly simple. You’ve agreed the KPI, you know the mathematical formula, you have the data, where’s the issue? How about if there is something in your performance today which is not typical or sustainable? For example, your inventory cover is lower than it usually is at this time of year (good…) but you are missing service level targets (not so good). If inventory reduction for a given service level is the change you are trying to make, then you may need to factor today’s issues into your baseline.

How do you set the target level of performance?

Personally, I feel that external industry benchmarks make interesting bedtime reading and perhaps inspire, but they can be a distraction through the benefits case process. They may be costly to acquire and there will always be a doubt over their applicability in your business. Better to ensure that you know with certainty how you are performing today and then set yourself and the business a meaningful target. Don’t be tempted to reverse engineer a target-level that justifies the spend. Remember – you or a colleague will have to deliver on the promise, and you may be leading the business into a value-destructive decision. Also, do some basic stress-testing of your numbers to develop confidence and an understanding of the risks that will inevitably arise during the value realisation stage.

Who owns the benefits case?

This needs to be understood clearly and a sense of ownership/responsibility needs to be developed. Make the ownership question a part of your early thinking and be sure the owner or owners are meaningfully involved at each stage of benefits case development. Ideally, benefits need to be written into individual performance objectives - if the benefits are important, use your reward system to drive achievement. The counter-weight to this last point, which can feel very “real”, is the need to ensure that the Leadership Team and senior sponsors are visibly committed and supportive. This should mean that there is strategic alignment, a shared belief in future success and a shared will to help throughout the project delivery. If your project feels like a one-person mission with no air cover and no possibility of extraction, you are probably doing it wrong.

Are you building trust and cooperation?

Big investments and delivery projects bring complex challenges and change. Whole functions or whole businesses need to be aligned to deliver success. Is the project about top line growth or cost reduction, or both? Be clear and as open and honest as you can across the organisation and with your partners. The delivery team will need help and good will from a broad base of colleagues and it is more likely that this will be forthcoming if there is transparency and faith in the motives and target outcomes.

Do all of these things reasonably well and you will be outperforming much of the competition by realising and demonstrating the value of investments in people, process and technology. You will be on your way to achieving a new level of performance that will become the standard by which you evaluate your next phase or next new project.